Volkswagen

Das Auto

Cutting labor costs without redundancies

A Small Glimpse

Founded in 1937 Nazi trade company Tagline- Das Auto Subsidiaries Audi, Bentley, Skoda, Lamborghini, Bugatti Largest owners Porsche, Emirate of Quatar Outcome of Hitler's desire Total 25 models around the world

Case Introduction

Early growth Biggest European car producer Recession in 1990s lead to reduction in sales, investments, turnover, productivity Huge competition from south-east Asian producers Situation demanded for change Requirement to reduce manpower and increase productivity

Traditional Way To Reduce Manpower

Production planning
Problems

 Focus on short term success  Introduction of KVP, in order to improve quality and reduce production time  Outcome 25% increase in productivity but manpower increased from 10000 to 30000

Direct and Indirect Manpower Cuts

Direct layoff may damage company image which is known for caring for its workforce May have to Prepare up a social compensation plan Preretirement schemes but all the workers has already participated Savings derived out of Indirect cuts were not sufficient due to legal or company regulations

The Volkswagen Model

The Volkswagen model represents the alternate routes to the goals of cost reduction, productivity growth, and social welfare suggesting that job preservation and cost savings are not necessarily incompatible In the Volkswagen model, corporate downsizing is not institutionalized as a normal response to competitive pressures, but is rather a last priority for cost reduction

3 Elements of Volkswagen Model

28.8-hour working week for employee Part time employment element Qualification element

28.8-hour working week for employee

It is covered by collective bargaining agreement Basic idea was to reduce labor costs by 20% without layoffs Working hours reduced to 28.8 hrs/week from 36 hrs/week without wage compensation

Other Variations in Labor Shift

Part Time Employment Element

This measure provided for a gradual increase of daily working hours for trainees and a gradual decrease of working hours for older employees Along with maintaining employment and cutting labor costs, additional benefit is rising productivity

The Qualification Element

This model enables the employees to take days off for a longer period during the year to fulfill private plans, gain further qualifications or to join a training programme This model appeals mainly to people between 18 and 30 years and singles The model is based on a 3-6 month break Major advantage is upgradation of the workforce without compromising on production

Other Examples
1. GE
Budgeting process was redefined Reduced the no of hierarchal levels from 9 to 4

Conclusion
Volkswagen thought that a cut in working hours, instead of mass dismissals, was a correct alternative as it was the best way to take all interests into account such as: The advantage of assuring employees about their job (employment assurance). With the Volkswagen system, trainees could count on their jobs for a secured future. Provided workers with better working conditions, higher basic wages, etc. The advantage for the company in the form of cost reduction. The company is saving money by reducing working hours and raising productivity

Thank you

Presented by: Aditya Rathi (40) Shreya Rungta (42) Dhaval Savla (44) Parth Shah (46) Abhishek Sharma (48)